Detroit is bankrupt according to the national media and its emergency manager, Kevyn Orr -- but technically, it isn't bankrupt yet.

Under Chapter 9 bankruptcy law, filing for bankruptcy is only the first of many steps for Detroit, which claims to have $18 billion in long-term debt. The code has rigorous qualifications that the city must meet in order to show that bankruptcy is the only available option.

Attorneys representing Detroit's emergency manager will be seeking to convince a bankruptcy judge that Detroit is eligible to go through the process. Labor unions, pension fund representatives and bondholders -- all creditors who stand to lose hundreds of millions, if not billions, of dollars in obligations -- could fight to prove that Detroit should settle its debts without a judge.

What is likely to be a fierce court battle begins Friday, when U.S. Bankruptcy Judge Steven Rhodes hears arguments over his schedule for Detroit's eligibility to file for bankruptcy. Even that timetable is proving controversial.

Rhodes presented a schedule that would give opponents until Aug. 19 (less than three weeks) to file any objections they have to Detroit's bankruptcy. He also is expected to appoint another judge who will serve as a mediator between Orr and creditors during the process. Rhodes' proposal sets the eligibility trial for Oct. 23 -- meaning that challengers to the city's bankruptcy will have less than three months to submit all evidence that the city isn't bankrupt. Orr has said that he wants the city to exit bankruptcy proceedings by next fall, when his term as emergency manager is expected to come to an end.

"It is an aggressive timeline," Orr's spokesman, Bill Nowling, told The Huffington Post. "But I think it's one that everyone can meet, and the judge thinks it's one everyone can meet."

That timeline could prove difficult to enforce. San Bernadino, Calif., filed for bankruptcy in July of last year. A judge will finally decide whether the city is eligible to go through bankruptcy at an Aug. 28 hearing -- almost 14 months since eligibility hearings began. It took a judge nine months to decide that Stockton, Calif., another city that is currently in bankruptcy court, was eligible to file.

"These people have much more at stake in Detroit than they did in San Bernadino," Michael Sweet, a municipal restructuring expert and attorney with Fox Rothschild, told The Huffington Post. "I think it's a big stretch. It's possible, but given what's happening and given the fact that there are so many things to decide, I think it's pretty optimistic to think it's going to happen on a fast track."

But Rhodes is known in legal circles for running a tight ship in his courtroom. "I could certainly see him pushing the sword," said Peter Henning, a law professor at Detroit's Wayne State University. "If a lot of evidence has to be presented, it could be months" to get a ruling on whether Detroit's problems can be solved in bankruptcy court.

Nowling said that critics of the schedule were just voicing "standard objections" to Detroit's decision to file for bankruptcy.

"People who really don't have any good ideas on how to fix anything attack the process," he said. "The process won't work, or the process is too short, or the process left somebody out ... instead of getting to the substance of the matter."

Once Rhodes issues a decision on the schedule, attorneys on both sides will spend the next 90 days compiling evidence and preparing for a trial that will, ultimately, decide whether the city is eligible to go through bankruptcy proceedings.

Creditors could argue that Detroit isn't technically insolvent, that it doesn't intend to make a long-term plan for exiting bankruptcy court, or that it didn't negotiate in good faith with labor unions and other parties.

"I don't think there will be any question over whether Detroit is insolvent," Sweet said. "The other two factors, though, could definitely get play."

Nowling said Orr and his restructuring team held more than 100 meetings with stakeholders and creditors before filing for bankruptcy, which happened just minutes before a state court judge was supposed to hold an emergency hearing from pension plans and unions requesting to block the bankruptcy.

"It's hard to say that we won't negotiate in good faith when we put a proposal on the table and instead of coming back with a counterproposal, you sue us," Nowling said. "The emergency manager has been sued three times in this process by the unions. That's a pretty clear indication that any type of discussions or negotiations in good faith are over -- when people start suing you."

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How Detroit Could Change After Bankruptcy

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We combed through Detroit Emergency Manager Kevyn Orr's 150-page-plus restructuring plan he released to the public in June 2013, weeks before the city's bankruptcy filing, after meeting with bondholders. Orr met with those creditors to negotiate Detroit's structural long-term debt, now said to total over $18 billion. Along with finances, the plan proposes 10 years' worth of improvements, priorities and changes that will affect residents, businesses, neighborhoods and visitors.
Click through the slideshow to read our analysis of how Detroit could change after bankruptcy. You can see the nitty-gritty details for yourself by reading the full report here.

Mayor Dave Bing launched a program in April 2010 with the goal of demolishing 10,000 vacant structures by the end of his term. Over 5,000 of those abandoned buildings have been torn down, with the remainder scheduled to go by the end of 2013.
But there was never enough money to fully rid Detroit of its blighted buildings. Orr's report says a funding gap of $40 million exists before Bing's goal can be completed.
And while 10,000 demolitions is an insanely high number, Orr's report says that only covers 13 percent of the city's vacant buildings, and 26 percent of those that have been deemed dangerous.

Orr's restructuring plan presents a number of ways the city can speed up blight removal. One tactic involves coordinating and simplifying the myriad local, regional and national agencies and statutes that regulate demolitions. Another priority is moving blighted land through the demolition process faster, in order to return those properties to private ownership (Pages 72 and 73).
Police and fire departments will integrate their data so demolitions can be targeted to reduce crime and arson.
Orr's budget calls for $50 million annually in 2014 and 2015 to battle blight, to be increased to $100 million each year for 2016 through 2018. Some of that money will have to be raised through grants and public-private partnerships.

According to the city's preliminary analysis, Detroit hasn't kept up on its obligations to beneficiaries of the General Retirement System and Detroit's Police & Fire Retirement System. By how much? A staggering $3.5 billion, says Orr, who writes, "At this level of underfunding, the City would have to contribute approximately $200 million to $350 million annually to fully fund currently accrued, vested benefits. Such contributions will not be made under the plan."

Under Orr's plan, pension funds would receive a proportional (pro rata) share of $2 billion in notes that the city would issue. But since that share of $2 billion won't equal the total amount of unfunded pension costs, the report notes, pensioners should expect "significant cuts in accrued, vested pension amounts for both active and currently retired persons."
According to the Detroit Free Press, retiree health benefits will likely be transferred to modified medical benefit plans that will come into effect with the Affordable Care Act. Those over the age of 65 would be transitioned to Medicare.

Hiring a new police chief was the first task on Kevyn Orr's Detroit Police checklist, but it's not the only change he recommends. Orr envisions using a data-driven approach to restructure DPD from top-to-bottom. Another priority is improving officer morale and giving the force the tools they need to do their jobs: bulletproof vests, tasers, vehicles and functional IT. He's also a fan of the "Broken Windows" policing theory piloted last year in the city's Rosedale Park neighborhood. In total, Orr plans to spend $26 million more on DPD in 2014, with an additional $66 million investment over the next four years.

It should come as no surprise to readers that Detroit is bonded to the hilt. Creditors may take a huge hit on payments from the city, reportedly as little as 10 cents on the dollar. Orr has stopped paying some debts entirely, and his plan calls for reinvesting that money into city services after bankruptcy.

Aging fleets of fire engines and facilities to maintain them threaten the impact of the Detroit Fire Department, which responds to around 30,000 calls every year. The restructuring plan calls for at least $6 million in additional investment over the next five years, with an $18.4 million facility investment in 2017. But the restructuring plan doesn't talk about hiring any more fire investigators -- as of Dec. 2012, the department only had 12 on staff to investigate more than 5,000 suspicious fires set in the city's neighborhoods every year.

The restructuring plan mentions that DDOT, Detroit's underfunded bus system, could eventually be merged with a private company or SMART, the suburban public transportation system. There's also talk of bringing DDOT under the control of the new regional transit authority. A consultant is apparently studying long-term solutions, including outsourcing (Pages 74 and 75).
While it could make more sense long-term to have all of the region's transit under one umbrella, the RTA is too new to make that determination and doesn't yet have funding. In the event of a merger, gains in savings and efficiency may be balanced with layoffs.

Managing and maintaining the 982-acre Belle Isle Park costs the city of Detroit some $6 million annually. Orr's verdict on Belle Isle comes as no surprise: He says the city "intends to enter into lease transaction with State on generally the same terms as the State’s prior proposal," though no timetable is given (Page 87).
That means "Detroit's crown jewel" is slated to become a state park managed by the Michigan Department of Natural Resources. Under the previous 30-year lease proposal, pedestrians and bikers would still be able to access the park for free. Motor vehicles would have to pay an annual $11 Recreation Passport fee to the MDNR, good for accessing any state park.

Orr proposes possibly transitioning to "paperless" transactions at the 36th District Court (Page 73). Welcome to the 21st century, guys!

Orr's report proposes levying an income tax for reverse commuters -- those who live in Detroit but work outside the city (Page 81). The City loses approximately $30 to $45 million of income tax revenue every year, claimed to be 15 to 20 percent of the total tax collected, from reverse commuter non-filers. Expect new legislation to tax these residents.